Art Talk is a series of rotating columns which explore current issues in the art market.
· Limits of Ownership 1
· Limits of Ownership 2
· Statute of Limitations
· The Discovery Rule
· Nazi Confiscated Art
· Abandoned Property
DETERMINING THE VALUE OF
INVESTING IN ART
INSURING FINE ART
an excerpt from
by Aaron Milrad
Tax can take many forms. There may be a tax on income, on the
gain from the sale of a capital property, on gifts of valuable property made
during one's lifetime, and on bequests made from one's estate. In addition, there
are direct and indirect taxes, by different levels of government, on various goods
This chapter restricts itself to the tax consequences in Canada, the United States,
and Mexico of the gifting of art and art objects, primarily for charitable purposes,
during the lifetime of the donor or by his or her estate. It deals with the general
concepts employed by the federal governments of the three countries to encourage
donations through tax benefits and to restrict those benefits by specific rules and
There are numerous excellent tax texts available to readers who wish more tax
information (2), and professional tax advisors may be consulted for specific advice.
As taxation rules and regulations change frequently, this discussion will not deal
with specific tax rates or with the intricacies of making donations and the instruments
used for such donations. Sadly, much tax legislation is political in nature and changes
with the political party in power and its political agenda; often exceptions are built
into the taxing statutes, both in Canada and in the United States, because of political
pressure. The only constants are that governments require money, and taxation is the
way money is raised(3).
Historically, most museums and public institutions have received their finest works
through donations of collections from both the rich and famous and the not so rich
and not so famous. Often the donations are made, at least in part, for the tax benefits
available to the donor. Rarely, however, will a donation of an important object at fair
market value net the donor as much as if the work had been sold at fair market value,
even after a capital gains tax has been applied, as most tax rates are fifty percent or
less and the after-tax benefit of a donation would be less than the funds received from
a sale at the same fair market value. Therefore, altruism is as vital to the concept of
a donation as are any tax benefits. Whether a donor's impetus is social standing or a
genuine desire to share the works with the designated institution, its members, and the
general public for the greater good, any tax regime that does not recognize the benefit
to the community of such donations is short-sighted and ultimately harmful to the nation
Unfortunately, taxing authorities rarely have an understanding of aesthetics and culture,
which gives rise to frustration, both in the arts community and in the taxing authorities.
Moreover, from time to time there are those who wish to abuse the system by using tax
loopholes, which are subsequently attacked by the taxing authority, often resulting in
ill will toward the cultural communities. Overall, however, donors of art objects make
a major contribution and enhance both the culture and the cultural history of nations
for the benefit of all.
About the Author
Aaron M. Milrad is a member of Fraser Milner, Barristers & Soliciters, a Canadian national
law firm headquartered in Toronto. At Fraser Milner he provides specialized legal services
to clients across Canda, the United States, and other countries who are involved in the visual,
performing, and literary arts, music, publishing, media, and mutlimedia. Mr. Milrad also provides
consulting services, including strategic planing and marketing for creators, companies, nonprofit
organizations, and foundations and tax estate planning for creators, collectors and arts professionals.
To purchase a copy of Artful Ownership, please contact:
American Society of Appraisers, International Headquarters, 555 Herndon Parkway, Suite 125, Herndon, VA 20170
Note from the Editor
Copyright © 2000 by the American Society of Appraisers and Aaron M. Milrad.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system,
or transmitted in any form by any means, electronic, mechanical photocopying, recording or otherwise,
without the prior written permission of the American Society of Appraisers, P.O. Box 17265,
Washington, D.C. 20041. (800)272-8258
Printed in the United States of America.
back to top